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Special Needs Trusts for Elders and Others

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Legal trusts can help a disabled individual get added help beyond what government programs like Medicaid offer and without sacrificing what these programs do offer.  You may recall Gordon Gault, a Chicago attorney who specializes in trusts, wills and probate among other legal areas, who spoke with me some time ago about guardianship.  Recently we also talked about trusts available for elders or others with special needs.  Gordon explained that the concept behind a special needs trust is that a person can qualify for Medicaid, Social Security and other government programs while at the same time having money set aside for supplemental services or benefits.  In Illinois a trust can be handled in one of three ways. 

A special needs trust means that the benefits are not for room and board, but for special, or supplemental, needs.  This trust is established by some one other than the disabled person so that the disabled person can receive  government benefits to which they are normally entitled, but can also obtain extra health services not provided by the government, clothing, vacations, a television, or educational benefits.  Gordon offered the example of someone with serious disabilities – mental or physical –  where they qualify for government benefits.  If the disabled person has a relative with a significant amount of money to be gifted to the disabled person and grantor does not want the money to prevent the disabled person from receiving government benefits, he can set up the special needs trust.  The trust basically says that the trustee, whoever is selected by the grantor, can oversee the use of the trust funds.  Upon the death of the disable person all of the remaining trust funds pass to whoever is selected by the grantor.

The second is an Omnibus Budget Reconciliation Act 93 payback trust, and it is federally-created.  It allows an individual to create a first party trust, that is the individual for him-/herself.  This is only for people under age 65.  That person can take whatever money they have if they have become seriously ill, and do not want to lose all their money to health care costs.  If they have a parent or grandparent alive, they can hand the money over to them with a trust document that has the same special needs language as the first option.  If it is someone other than a parent or grandparent, they need a court order…a relatively simple procedure.  There must be a regular accounting to the sate as trustees, but it is very straightforward.  The balance of whatever remains in this trust after the beneficiary dies goes back to government to pay back whatever the government has expended.  If there is excess, it goes wherever the trust says it will go.

The third is a pooled trust for a disabled person under age 65.  Control does not go to a family member; it goes to the pooled trust, a non-profit organization monitored by the state.  The organization provides the advantage that they are 100% trustworthy and they are professionals who know what they are doing.  They know the rules and regulations are, and the money is well-protected.  They provide the paperwork to the state oversight agency.  The disadvantage is that it is not family making decision for the trustee; it is an agency.  Upon the death of the disabled person, 15% goes to the non-profit and 10% goes to charities.  Four percent of the overall pooled trust is taken on an annual basis for operating costs.

These are all specific to Illinois.  Gordon Gault is available for consultations about Illinois trusts, and he encourages individuals to check with counsel in their own state if the expected beneficiary is not a resident of Illinois.  Charlotte Bishop is a Geriatric Care Manager and founder of Creative Case Management, certified professionals who are geriatric advocates, resources, counselors and friends to older adults and their families throughout metropolitan Chicago. Please email your questions to Charlotte Bishop.

Copyright ©2011 Charlotte Bishop 

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